Learn About Solar

Solar Panel Installation Cost and Factors Influencing Price

Solar panel costs have plummeted significantly in recent years, making them more accessible to homeowners. Combined with the notable increase in utility electricity rates in 2022, investing in home solar systems now presents greater opportunities for saving money than ever before.

According to the 2023 Heatmap Climate Poll, 46% of US adults are interested in transitioning to solar energy for their homes in the future, while 13% have already implemented solar panels as their primary energy source.

So, what challenges do American homeowners face when it comes to installing solar panels? The most significant barrier is often the upfront cost of solar panels. However, just like in a horror movie where the fear diminishes when you expose the monster to light, the perceived high cost of solar panels becomes less daunting once you understand the financing options and long-term savings they can provide.

Are Solar Panel Prices Decreasing

Similar to the impact seen with computers, large-screen televisions, and mobile phones, the solar panel industry has greatly benefited from economies of scale, resulting in a steep decline in costs that has revolutionized the energy sector.

Utility-scale solar installations are now among the most cost-effective sources of power generation globally and are rapidly supplanting older, more polluting coal and natural gas plants. This transition is driven by the declining costs of solar technology, making it a preferred choice for sustainable and affordable energy.

Moreover, homeowners can now generate their own electricity more affordably than in the past. This increased accessibility to power production allows individuals to take control of their energy sources and reduce dependency on external suppliers.

What to Expect and Factors Affecting Cost

Today's premium monocrystalline solar panels typically range in cost from $1 to $1.50 per watt, which places the price of a single 400-watt solar panel between $400 and $600, depending on the purchasing method.

On the other hand, less efficient polycrystalline panels are more affordable at around $0.75 per watt, bringing the price of a 400-watt panel to roughly $300.

The method of purchase also influences the cost of a solar panel. If you acquire them through a full-service installer, you may benefit from lower prices per panel compared to buying them individually from a retail store.

It's important to note (and will be further discussed below) that solar modules typically account for less than 20% of the total cost of a home installation. Therefore, choosing less expensive (and lower quality) panels may not be the most effective way to lower the overall project cost.

Comparing Price per Watt and Cost per kWh

On the other hand, less efficient polycrystalline panels are more affordable at around $0.75 per watt, bringing the price of a 400-watt panel to roughly $300.

How Much Does Solar Energy Cost per Watt?

The cost of a fully installed solar system typically ranges from $3 to $5 per watt before accounting for incentives such as the 30% tax credit. This means a 5,000-watt (5 kW) solar system could cost between $15,000 and $25,000.

For larger and more straightforward projects, the price per watt often falls within the $3-$4 range. By taking advantage of incentives such as tax credits and rebates, you may be able to further reduce the cost per watt.

However, certain factors can increase your solar price per watt into the $4-$5 range:

Smaller system size
Unusual roof materials or layout
High-end panels and inverters
Multiple arrays instead of a single array
Additional work such as electrical panel upgrades, trenching, or roof repairs

Determining Solar Cost per Watt

Price per watt ($/W) is a useful metric for comparing different solar energy quotes, even if the quotes differ in total wattage, solar panel brands, or other factors.

Knowing your solar price per watt both before and after claiming the 30% tax credit can offer insights into the cost-effectiveness of your solar project.

Several factors can influence the price per watt of a solar installation, but the average cost is around $2.75 per watt. This cost may change if the project includes special requirements such as ground mounting, a main panel upgrade, or an EV charger installation.

An Overview of Cost Per Kilowatt-Hour (kWh)

Another way to evaluate the relative cost of solar energy is by examining its cost per kilowatt-hour (kWh). While the price per watt takes into account the size of the solar system, the cost per kWh reflects the system's price per unit of energy produced over a specific period. This metric is calculated by dividing the net cost of the system by its lifetime energy output, giving you the cost per kilowatt-hour. This metric is often referred to as the levelized cost of energy (LCOE).

What is a kWh?

A kilowatt-hour (kWh) is a unit of energy that represents using 1,000 watts (1 kilowatt) of power for one hour. For instance, an energy-efficient clothes dryer uses around 2 kWh of electricity per load, and central air conditioning typically uses around 3 kWh per hour.

When evaluating solar bids, the cost per watt is useful for comparing different options. However, the solar energy cost per kWh can provide a clearer picture of the value of solar power compared to purchasing electricity from the utility company.

On average, solar systems obtained through solar.com cost around 6-8 cents per kWh, depending on the size, type of equipment, and local incentives.

To put this in context, let's compare these solar costs to the average cost of utility electricity in different states.

Determining the Cost of Solar Panel Installation

To estimate the cost of solar panels without enduring a sales pitch, you can try these methods:

Online calculators: Many websites offer calculators that allow you to input your location, energy usage, and other details to provide a quick estimate of the cost of installing solar panels.
Manual calculations based on your electricity usage: By analyzing your energy consumption and local energy rates, you can estimate the size of the system you need and its cost.
Comparing costs for similar homes: Look up the average cost of solar panels for homes similar to yours in terms of size and energy needs to get a rough idea.

Manual Calculation of Solar Panel Costs

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If you prefer to calculate the cost of your solar system offline, follow these steps to estimate the cost based on your electricity usage:

Gather recent electricity bills—ideally, as many as possible.
Calculate your average monthly electricity consumption by finding the mean of your bills.
Divide the monthly consumption by 30 to estimate your daily electricity use.
Once you have your average daily electricity use, follow the steps provided in the graphic below. Here are some additional tips:

Estimate the price per Watt (PPW) from a local solar installer, which usually ranges from $3.50 to $5 before incentives.
Tip: Calculate costs using both the high and low PPW scenarios for a better cost range.
Look into local incentives such as rebates and tax credits that could reduce your solar panel costs.
Keep in mind potential future increases in electricity consumption, such as the purchase of an electric vehicle, heat pump, or air conditioning.

Solar Panel Pricing: Cost Per Square Foot

Another approach to estimate the cost of solar panels for your home is to look at the prices paid by homeowners with similar properties. While we recommend reaching out to friends, family, or neighbors who have installed solar systems to get a better understanding of the benefits, drawbacks, and costs, we've gathered comprehensive data for you.

Our analysis of thousands of systems sold on solar.com in 2022 provides insights into the average cost of solar panels based on the size and layout of different homes, including square footage and the number of bedrooms.

The average cost of solar panels after applying the 30% tax credit is around $8.77 per square foot of living space. However, this cost can vary depending on the size of the home.

For instance, the post-tax credit cost of solar panels for a 2,500-square-foot home is approximately $20,000, which comes to a rate of $7.96 per square foot.

In contrast, the cost of solar panels for a 1,500-square-foot home tends to be slightly lower overall, but the cost per square foot increases to around $12.83, with the average system cost dropping by only $1,000.

How Much Do Solar Panels Cost for a Three-Bedroom Home?

The pre-incentive cost for a home solar system averages around $29,161 for a three-bedroom house, dropping to approximately $20,412 once the 30% tax credit is applied.

Despite these figures, the chart below illustrates that both the number of bedrooms and total living space are not reliable indicators for the size and cost of a solar system.

When sizing solar systems, it's essential to base the design on electricity usage rather than home size or number of bedrooms. This approach is more relevant because, for instance, a smaller home with high electricity demands due to electric vehicles and an electric heat pump could require a larger solar system compared to a larger home that uses less electricity, such as one with gas heating.

Although using this method provides a general idea for sizing, the other two methods offer a more precise estimate.

After calculating a rough estimate for your solar system, compare it to the cost of purchasing electricity from a utility provider. This comparison will help you determine the potential savings of switching to solar power.

Are Solar Panels a Cost-Effective Investment?

Homeowners across the United States can achieve significant savings on their energy bills by using solar panels to power their homes instead of relying solely on electricity from the grid. This approach is particularly advantageous in light of the sharp increase in grid electricity rates during 2022 and 2023.

Switching to solar energy is akin to purchasing a large quantity of a product in bulk—like buying a large container of coffee grounds from a wholesale store such as Costco, instead of purchasing individual cups at a coffee shop. Although the initial investment in solar panels may be higher, it quickly pays for itself and can result in substantial long-term savings, much like the coffee grounds would save you money compared to regularly buying more expensive individual cups. In essence, home solar offers a large-scale approach to efficient energy consumption and cost savings.

Monthly Savings with Solar Panels: A Cost Analysis

The amount of money you save each month with solar panels depends on several key factors:

Utility electricity rates: The cost of electricity from your local utility company can significantly impact how much you save with solar power.
Electricity consumption: Your household's energy usage determines the amount of electricity you need to generate with solar panels to offset your costs.
Financing method: How you finance your solar system—whether you buy it outright, lease it, or use a loan—affects your savings.
Energy goals: Your energy objectives, such as achieving net zero energy or simply lowering your bills, will shape your solar savings.

These factors can vary widely across different households. Let's explore the typical differences in monthly electric bills for households with and without solar panels.

By paying for a solar system upfront in cash, you can maximize your savings over time, potentially saving more than $50,000 over the system's lifetime, although it may take a few years to see a return on your investment.

Alternatively, financing the system with a solar loan allows you to benefit from immediate savings, as loan payments may be lower than your usual electricity bill, but the interest from the loan can reduce your overall savings.

Customizing the size of your solar system and the financing option gives you control over your electricity expenses, which is not possible when relying solely on a utility company for power.

Timeframe for Solar Panel Return on Investment

Customizing the size of your solar system and the financing option gives you control over your electricity expenses, which is not possible when relying solely on a utility company for power.

Assessing the Financial Viability of Solar Energy Investments

A reliable safeguard against energy inflation, investing in home solar presents a stable opportunity with a return rate comparable to real estate and retirement accounts. By shifting to home solar, you can substitute unpredictable utility expenses with consistent, affordable monthly payments on your solar system.

Why is solar a more financially sound choice compared to traditional utility electricity?

The graph below illustrates the consistent increase in utility electricity rates from 5 cents per kWh to 16.5 cents per kWh over the past 44 years.

For those without solar, this escalation can be concerning, as it points to inevitable and ongoing increases in utility rates. In contrast, homeowners with solar systems can take advantage of these rate hikes, benefiting from reduced energy costs throughout the 25-year lifespan of their solar system's warranty.

Home solar offers a glimpse into the past by providing electricity at a cost that mirrors rates from decades ago. While current utility rates can be high, the average cost per kilowatt-hour with home solar systems ranges from 6 to 8 cents.

This is comparable to utility rates from approximately 40 years ago, making home solar a cost-effective and attractive option for energy production.

Is Investing in Solar Panels a Smart Financial Move?

Take control of electricity expenses: Solar panels allow you to generate your own power and manage your electricity costs more effectively.
Protect against energy inflation: By investing in solar, you lock in your energy costs and protect yourself from rising utility rates.
Lower your carbon footprint: Solar panels produce clean energy, helping you reduce your reliance on fossil fuels and decrease your carbon emissions.
Boost your home's market value: A solar-powered home is attractive to potential buyers and can increase your property value.
Maintain power during outages: When paired with a battery, solar panels can provide a reliable source of backup power during grid failures.

However, if you suspect that electricity rates will significantly drop and remain low (below 8 cents per kWh) for the next 25+ years, solar panels may not be the most cost-effective choice for you.

Solar Panel Installation Pricing: A Comprehensive Guid

Installation labor for residential solar projects constitutes about 5.5% of the overall cost, according to a 2022 report from the National Renewable Energy Laboratory.

For a solar project priced at $25,000, this equates to roughly $1,375. This percentage might be lower than homeowners anticipate, as labor typically represents a larger portion of expenses in car repairs, landscaping, and other home improvements.

Keep in mind that installation expenses can fluctuate significantly depending on the specific requirements of the project and local labor rates. For instance, the cost of specialized electrical labor may be higher compared to general labor for panel installation. This inconsistency is one reason why finding a reliable online estimator for solar installation costs can be challenging.

In general, labor expenses have decreased over the past ten years due to technological advancements and the growing experience of the workforce. The graph below outlines the cost distribution for solar panel installations since 2010.

An important point to highlight is that residential solar costs experienced a significant reduction of 64% throughout the 2010s. This decline can be attributed to substantial decreases in the costs of solar modules, inverters, and labor over the past decade.

However, non-labor soft costs and electrical hardware expenses have been less flexible. Despite this, the labor involved in installation comprises only a small portion of the total cost of a solar system.

It's crucial to have experienced professionals install the system to ensure it endures for at least 25 years.

Is DIY Solar Panel Installation Possible?

Some homeowners with advanced expertise in construction, electrical systems, and local permitting guidelines, as well as sufficient time, can successfully install solar panels while adhering to inspection and interconnection standards.

However, undertaking a DIY solar installation could potentially void the manufacturer’s warranties on the equipment and excludes the coverage of workmanship warranties.

This means that if any issues arise with the equipment or installation, such as damaged panels during setup or leaks from holes in the roof, homeowners will need to address and finance the repairs themselves.

Additionally, professional full-service installers often manage permitting, interconnection, and incentive applications — processes that can be complex and time-consuming.

Cost of a Single Solar Panel

The cost of a 400W solar panel varies depending on whether it is part of a rooftop solar array or purchased independently. When included in a rooftop array, a 400W panel costs between $250 and $360, which equates to $0.625 to $0.72 per watt. This pricing is available through full-service solar companies.

If you choose to purchase panels from a retail vendor such as Home Depot, a single 100W solar panel may cost around $100, while a set of ten 320W panels is priced at $2,659. This translates to a cost range of $0.83 to $1 per watt.

Due to their direct partnerships with panel manufacturers, full-service solar companies can offer panels at a lower cost per watt than retail vendors.

Lifespan of Solar Panels: What to Expect

Solar panels today are often backed by performance warranties lasting between 25 to 30 years, guaranteeing a certain level of energy production (typically around 85-92% of their original capacity) over that period. Despite the warranty limits, solar panels can remain operational and continue generating a substantial amount of electricity well beyond the warranty duration.

For instance, the first modern solar cells, developed in 1954, are still actively producing power while on display in a museum. Similarly, a solar panel installed in Vermont in 1980 is still performing at 92% of its initial capacity.

Given these precedents, it's reasonable to expect that contemporary solar panels will maintain a high level of production for at least 25 to 30 years. The real question is how much longer they might continue to exceed their warrantied lifespan.

Strategies for Reducing Solar Panel Expenses

Despite home solar being more cost-effective than relying on utility electricity, there are additional strategies to further decrease the expense of your solar setup and enhance your overall energy cost savings.

Solar incentives

First, there are various solar incentives offered by federal, state, and local governments, as well as utility providers. The most significant is the federal solar tax credit, which allows you to claim 30% of the cost of your solar panel installation as a tax credit. For instance, if your total cost for a solar system is $25,000, you can receive a $7,500 tax credit on your federal income tax return for the year your system becomes operational.

In addition, many states provide further incentives such as state-level tax credits, exemptions, and rebates for residential solar systems. For example, New York offers a NYSERDA rebate, a 25% state tax credit, and both sales and property tax exemptions for solar installations.

On a local level, city governments, municipal utilities, and investor-owned utilities often offer additional incentives for solar panel installations, battery storage, and other energy-efficient home improvements. These incentives can vary by region, so it's worth checking what's available in your area.

Contrasting Different Quotes

In many regions across the United States, there are several solar installers vying for your business. Obtaining quotes from at least three reputable installers can help you understand the market price, filter out any less credible companies, and give you the upper hand when negotiating a better deal.

While it does require time and effort to research installers, schedule meetings, and listen to sales pitches, this process is essential for finding the most competitive rates. To streamline the process, Solar.com provides a platform where you can instantly access multiple quotes from trusted installers, enabling you to compare options easily without feeling pressured.

Regardless of your approach, evaluating multiple quotes is key to minimizing your solar panel costs and ensuring you receive a high-quality, long-lasting solar installation.

Are Free Solar Panels Available?

Advertisements on platforms like Facebook and YouTube may promote the idea of receiving free solar panels from companies such as Tesla, Home Depot, or even the US government, but this is a misleading claim often associated with scams. These scams aim to collect personal information or deceive individuals into entering into long-term solar lease agreements that are less beneficial compared to owning solar panels outright.

For instance, in February 2023, a Facebook page called "Solar Panel Rate" posted multiple ads suggesting that Elon Musk was offering homeowners $2,500 to test new solar technology. Closer scrutiny revealed the account was managed by three individuals in Indonesia and the ads were intended to gather personal data.

Similarly, YouTube is home to numerous ads asserting that the "US government is providing free solar panels." Although the federal government has bolstered the solar tax credit and introduced new incentives for home electrification through the Inflation Reduction Act, it is not actually giving away solar panels.

Strategies for Reducing Solar Panel Expenses

The declining costs of solar panels, combined with the recent rise in grid electricity prices, have positioned home solar as an efficient way to reduce essential energy expenses.

Though the initial cost of home solar can seem daunting, it's worth noting that investing in solar panels is like purchasing 25 years' worth of electricity in advance. While there is a higher upfront expense, it is ultimately more cost-effective than continuously buying electricity from a utility provider.

Moreover, zero-down solar loans allow for a manageable spread of solar panel costs and often result in immediate savings on energy bills.

Installation itself constitutes roughly 5.5% of the total cost of solar projects. However, other non-labor-related expenses such as permitting, inspection, and general overhead can make up around half of the total cost of home solar.

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